Sanctions – Ship Law Loghttps://www.shiplawlog.com
Comment and analysis by Reed Smith lawyers on the latest developments in the shipping industryTue, 15 Jan 2019 15:49:24 +0000en-UShourly1https://wordpress.org/?v=4.9.9https://shiplawlog.reedsmithblogs.com/wp-content/uploads/sites/17/2016/05/cropped-RSTwitterAvatar_512x512-32x32.jpgSanctions – Ship Law Loghttps://www.shiplawlog.com
3232IRAN SANCTIONS – UPDATEhttps://www.shiplawlog.com/2018/10/30/iran-sanctions-update/
https://www.shiplawlog.com/2018/10/30/iran-sanctions-update/#respondTue, 30 Oct 2018 11:26:39 +0000https://www.shiplawlog.com/?p=1599Continue Reading]]>On 8 May 2018, President Trump announced that the United States would withdraw from the Joint Comprehensive Plan of Action (JCPOA). In conjunction with that announcement, the President issued a National Security Presidential Memorandum (NSPM) directing the re-imposition of certain secondary sanctions, being those that apply to non-U.S. persons even where there is no U.S. nexus (e.g. no U.S. persons, no U.S.-origin goods, or U.S. dollar payments). As discussed in our earlier blog post, the first batch of sanctions was reimposed on 6 August and the second batch will become effective 5 November.

On 5 November, the United States will re-impose the following secondary sanctions:

Sanctions on Iran’s port operators and shipping and shipbuilding sectors, including IRISL;

Sanctions on petroleum-related transactions, including the purchase of petroleum, petroleum products or petrochemicals from Iran;

Sanctions on foreign financial institutions who engage with the Central Bank of Iran and other designated Iranian financial institutions;

Sanctions on the provision of specialised financial messaging services to the Central Bank of Iran and Iranian financial institutions;

Sanctions on the provision of underwriting services, insurance or reinsurance to SDNs or for sanctioned activities;

Sanctions on Iran’s energy sector.

These sanctions will also apply to the provision of associated services. For example, an insurance company could potentially face exposure to secondary sanctions if the coverage it provided pertained to the transportation of sanctioned goods and/or involved a sanctioned entity.

Equally as important, no later than 5 November, the U.S. will re-list as SDNs many of the persons and entities removed from the SDN list pursuant to the JCPOA. Therefore, even if your Iran-related business is not connected to a sanctioned business sector, it is important to ensure that your transactions do not involve persons or entities on the SDN List.

EU companies, in navigating their exposure to the reimposed U.S. secondary sanctions, must also be mindful of the EU’s so-called “Blocking Regulation”. That piece of legislation seeks to limit the impact of the U.S. secondary sanctions with a view to signalling the EU’s ongoing commitment to the JCPOA – so long as Iran continues to comply with the restrictions on its nuclear ambitions as required by that agreement. In reality that can mean EU companies facing the decision of continuing to perform Iran-related business and risk being in breach of the U.S. secondary sanctions, or bringing such business to an end and risk being in breach of the EU Blocking Regulation. In addition to the Blocking Regulation, as we reported here, the EU is considering implementing a mechanism of facilitating payments for Iranian exports that would by-pass the traditional banking systems and thereby limit the risk of influence of the U.S. authorities. Whilst we await details of how such a mechanism might work (a bartering style system has been referenced), a note of caution: in the eyes of the Trump Administration, the use of this mechanism could constitute an evasion of the U.S. sanctions on Iran. Additionally, and importantly in the context of a potential barter-style system, sanctions can be triggered even when funds are not exchanged.

In recent weeks, we have also seen some guidance from the English High Court specifically in relation to the scope and application of the U.S. secondary sanctions and the EU Blocking Regulation regimes. Details of the judgment were reported in our previous blog post.

Reed Smith’s Sanctions team and Shipping Group are uniquely well placed to advise on the impact of the re-imposed U.S. sanctions and the EU Blocking Regulation, with highly experienced trade and sanctions lawyers from both the United States and the EU available to you, 24/7. Contact one of the authors listed above, or your usual Reed Smith lawyer, and we will be more than happy to help you navigate the implications of these significant events for your business.

]]>https://www.shiplawlog.com/2018/10/30/iran-sanctions-update/feed/0lhansson@reedsmith.com, crogers@reedsmith.com, abrandt@reedsmith.com, erymland-kelly@reedsmith.comThe English High Court provides much needed guidance on the effectiveness of sanction exclusion language, following the USA’s withdrawal from the JCPOAhttps://www.shiplawlog.com/2018/10/25/the-english-high-court-provides-much-needed-guidance-on-the-effectiveness-of-sanction-exclusion-language-following-the-united-states-withdrawal-from-the-jcpoa/
https://www.shiplawlog.com/2018/10/25/the-english-high-court-provides-much-needed-guidance-on-the-effectiveness-of-sanction-exclusion-language-following-the-united-states-withdrawal-from-the-jcpoa/#respondThu, 25 Oct 2018 09:05:38 +0000https://www.shiplawlog.com/?p=1594Continue Reading]]>

After a tumultuous year in the Iranian sanctions landscape, much needed guidance is starting to trickle down through the English courts as to the scope and application of the US secondary sanctions and the EU Blocking Regulation regimes. On 12 October 2018, the English High Court handed down judgment in Mamancochet Mining Ltd v Aegis Managing Agency Ltd [2018] EWHC 2643 (Comm), in which Teare J was asked to consider contractual sanctions exclusion clause wording in the context of a marine cargo insurance policy.

The Claimants sought to claim under the policy for the theft of steel billets from bonded storage in Iran. The Defendant underwriters resisted payment on the basis of the policy wording, which provided inter alia that no cover would be provided if it exposed the insurer to any US or EU sanctions. The case was heard on an expedited basis in light of the fact that the relevant US sanctions will be re-imposed on 4 November 2018.

The Claimants succeeded. The court held that it was insufficient for the insurers to allege there was a risk that the US / EU authorities might conclude that payment was prohibited and so impose sanctions. The insurers were required to go further and establish that (on the balance of probabilities) the payment would be prohibited under either EU or US sanctions regimes and would, therefore, expose them to a sanction. This judgment may well see the insurance market re-visit its sanctions exclusion language, though the position will once again evolve come 4 November.

Of equal, if not greater, interest however are the judge’s obiter comments on the interaction between a contractual exclusion clause and the EU Blocking Regulation. Though non-binding, the judge appeared to be of the view that insurers may be able to suspend payments to their assured that would otherwise contravene US secondary sanctions, without being in breach of the EU Blocking Regulation. The insurers’ answer to allegations of a breach of the Blocking Regulation would be that the decision not to pay was predicated on a contractual entitlement rather than in compliance with a third country’s prohibition. The judge was not required to reach a firm conclusion on this because, on the facts, no secondary sanctions were engaged (a finding that would have been different post 4 November). No doubt this important point will be developed in subsequent cases.

]]>https://www.shiplawlog.com/2018/10/25/the-english-high-court-provides-much-needed-guidance-on-the-effectiveness-of-sanction-exclusion-language-following-the-united-states-withdrawal-from-the-jcpoa/feed/0crogers@reedsmith.com, abrandt@reedsmith.comSanctions on Iran – Fight for the survival of the JCPOAhttps://www.shiplawlog.com/2018/09/27/sanctions-on-iran-fight-for-the-survival-of-the-jcpoa/
https://www.shiplawlog.com/2018/09/27/sanctions-on-iran-fight-for-the-survival-of-the-jcpoa/#respondThu, 27 Sep 2018 08:31:55 +0000https://www.shiplawlog.com/?p=1566Continue Reading]]>As readers will be aware, following President Trump’s announcement on 8 May 2018, the USA has indicated its withdrawal from the Iran nuclear deal – the JCPOA – and that it will be reimposing secondary sanctions on Iran, being those which affect non-U.S. persons. The first tranche of secondary sanctions took effect in early August, with the second to follow in early November.

The remaining participants to the JCPOA, including the EU, have been looking for ways to signal their continued commitment to the agreement with a view to persuading Iran to fulfil its obligations. The EU, for example, has recently reactivated its so-called “blocking” Regulation, as we reported here. This week, the JCPOA signatories met in New York and released a statement explaining they were exploring ways of providing a mechanism to facilitate payment for Iranian exports. The expectation is that such a mechanism would be designed to avoid the use of U.S. dollars and therefore limit the possibility for interference by the U.S. authorities. The full text of the statement can be found here.

It remains to be seen precisely how this mechanism might work in practice, and indeed whether it would be successful in providing a route for non-U.S. companies to continue to trade with Iran whilst avoiding U.S. sanctions. The statement serves as a reminder that the issue of Iranian sanctions remains a live, and complex, issue.

]]>https://www.shiplawlog.com/2018/09/27/sanctions-on-iran-fight-for-the-survival-of-the-jcpoa/feed/0lhansson@reedsmith.com, crogers@reedsmith.com, abrandt@reedsmith.com, erymland-kelly@reedsmith.comIRAN SANCTIONS: UNITED STATES REIMPOSES SANCTIONS AND THE EU RESPONDShttps://www.shiplawlog.com/2018/08/07/iran-sanctions-united-states-reimposes-sanctions-and-the-eu-responds/
https://www.shiplawlog.com/2018/08/07/iran-sanctions-united-states-reimposes-sanctions-and-the-eu-responds/#respondTue, 07 Aug 2018 16:24:44 +0000https://www.shiplawlog.com/?p=1555Continue Reading]]>In the early hours of Tuesday, 7 August 2018, and as foreshadowed by President Trump’s announcement on 8 May 2018, the United States reimposed certain secondary sanctions on Iran, being those which apply to non-U.S. persons. The imposition of these sanctions follows the conclusion of a 90-day wind-down period and, as mentioned in our previous blog post, will impact (among other things) trade in graphite, raw or semi-finished metals and the Iranian automotive sector. Importantly, the new Iran sanctions permit the U.S. government to impose sanctions on non-U.S. persons who provide significant support to those acting in violation of the sanctions. Note that a second wind-down period expires in early November, at which time further secondary sanctions will be reimposed, affecting, among other things, shipping, the petroleum and petrochemical industry, and insurance.

The new Executive Order signed by the President, however, makes clear that the sanctions do not apply to any person conducting or facilitating a transaction for the provision or sale of agricultural commodities, food, medicine, or medical devices to Iran. Additionally, the Frequently Asked Questions published by the Office of Foreign Assets Control reiterate that the sale of agricultural commodities, food, medicine and medical devices is not sanctionable provided no designated parties are involved.

Just hours after the sanctions came into effect, President Trump tweeted that “[a]nyone doing business with Iran will NOT be doing business with United States.” We therefore expect the United States to actively enforce violations of these sanctions.

In response, the EU has now activated its so called ‘blocking’ Regulation, with a view to supporting the continuation of the Joint Comprehensive Plan of Action. The EU is seeking to ensure that Iran adheres to its nuclear-related obligations under that agreement and to encourage EU companies to continue to do business in Iran. One of the key aspects of this legislation is that it makes it a breach of EU law to stop doing business with Iran if you take that step in order to comply with the U.S. secondary sanctions.

The potential result is that EU companies, including shipping companies, banks, trading houses and others, may be faced with a choice of continuing to do certain business in Iran at the risk of breaching U.S. law, or refraining from doing such business at the risk of breaching EU law.

The Reed Smith sanctions team, with lawyers experienced in advising on both the U.S. and EU positions, are on hand to help you navigate these potentially mutually exclusive obligations.

]]>https://www.shiplawlog.com/2018/08/07/iran-sanctions-united-states-reimposes-sanctions-and-the-eu-responds/feed/0lhansson@reedsmith.com, crogers@reedsmith.com, abrandt@reedsmith.com, erymland-kelly@reedsmith.comIran Sanctions – August Deadlinehttps://www.shiplawlog.com/2018/07/24/iran-sanctions-august-deadline/
https://www.shiplawlog.com/2018/07/24/iran-sanctions-august-deadline/#respondTue, 24 Jul 2018 14:06:39 +0000https://www.shiplawlog.com/?p=1540Continue Reading]]>On 8 May 2018, President Trump announced that the United States would withdraw from the Joint Comprehensive Plan of Action (“JCPOA”). In conjunction with that announcement, the President issued a National Security Presidential Memorandum (“NSPM”) directing the re-imposition of certain secondary sanctions, being those that apply to non-US persons even where there is no US nexus. Depending on the economic sector targeted, the particular sanction will be imposed either 90 or 180 days after the President’s announcement (6 August and 5 November, respectively).

Implementation of the first batch of sanctions is rapidly approaching. On 6 August, the United States will re-impose the following secondary sanctions that were lifted as part of the JCPOA:

Sanctions on the purchase or acquisition of U.S. dollar banknotes by the Government of Iran;

Sanctions on Iran’s trade in gold or precious metals;

Sanctions on the direct and indirect sale, supply, or transfer to or from Iran of graphite, raw or semi-finished metals such as aluminium and steel, and software for integrating industrial processes;

Sanctions on significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in Iranian rials;

Sanctions on the purchase, subscription to, or facilitation of the issuance of sovereign debt; and

Sanctions on Iran’s automotive sector.

Note, however that the sanctions will also apply to the provision of associated services. By way of example, a person or entity providing indirect financing or transportation to Iran’s automotive sector would also face potential exposure to secondary sanctions. Shipping companies, therefore, need to be mindful of these changes.

To the extent that you are a non-US person involved in activities falling into any of the above categories, you should urgently seek advice as to how the secondary sanctions may impact your business, as failure to wind-down any such activity by 6 August 2018 may be a breach of the secondary sanctions. To the extent you are an EU person, your position may be further complicated by the so-called EU “Blocking” Regulation, which is anticipated to take effect in early August in order to meet the 6 August 2018 deadline. Be sure you understand your obligations pursuant to this legislation, as well.

]]>https://www.shiplawlog.com/2018/07/24/iran-sanctions-august-deadline/feed/0lhansson@reedsmith.com, crogers@reedsmith.com, abrandt@reedsmith.com, erymland-kelly@reedsmith.comIran Sanctions – Developments from the EUhttps://www.shiplawlog.com/2018/06/11/iran-sanctions-developments-from-the-eu/
https://www.shiplawlog.com/2018/06/11/iran-sanctions-developments-from-the-eu/#respondMon, 11 Jun 2018 15:53:47 +0000https://www.shiplawlog.com/?p=1525Continue Reading]]>As discussed in our blog post of 21 May 2018, the EU has reaffirmed its commitment to the Joint Comprehensive Plan Of Action in the wake of the US’ announcement that it would be withdrawing from that agreement and re-imposing its nuclear-related secondary sanctions. The European Commission has now published an amendment to its Regulation 2271/96, the so called “blocking statute”, in order to mitigate the impact of the US’ secondary sanctions.

The “blocking statute” contains a range of measures including:

provisions requiring EU persons not to comply with any restrictions provided under US secondary sanctions;

provisions preventing the enforcement of judgments relating to alleged breaches of the US secondary sanctions; and

provisions affording the opportunity to recover damages caused by application of the US secondary sanctions.

From 6 June 2018, the European Parliament and the Council will have two months to object to the measures. If no objections are made, the updated blocking statute will enter into force at the beginning of August, at the latest, and importantly before the first batch of the US’ re-imposed secondary sanctions takes effect.

There is the potential for EU companies to be caught between choosing to comply with the EU blocking legislation or with the US sanctions regime. It remains to be seen how companies will navigate these potentially mutually-exclusive requirements. You should be sure to seek out the most up to date legal advice for any Iran-related business, so you are acting in accordance with the latest guidance.

]]>https://www.shiplawlog.com/2018/06/11/iran-sanctions-developments-from-the-eu/feed/0crogers@reedsmith.com, cdon@reedsmith.comSanctions – North Koreahttps://www.shiplawlog.com/2018/05/25/sanctions-north-korea/
https://www.shiplawlog.com/2018/05/25/sanctions-north-korea/#respondFri, 25 May 2018 09:11:56 +0000https://www.shiplawlog.com/?p=1516Continue Reading]]>Listeners to our webinar on Wednesday will recall the discussion of the sanctions in play against the Democratic People’s Republic of Korea (DPRK, also known as North Korea). Of particular interest to the global business community had been the forthcoming summit between President Trump of the United States and Kim Jong Un, Leader of the DPRK, set to take place on 12 June in Singapore. The world was watching to see if, and how, this summit would affect North Korea’s position in the world and in particular whether it might herald any changes in the significant sanctions in place against it.

President Trump yesterday cancelled that meeting, stating that it is “inappropriate” in the current circumstances. This announcement comes the same day that the DPRK invited the world’s media to watch the apparent destruction of its nuclear weapons development site at Punggye-ri. Immediately after pulling out of the meeting with North Korea, President Trump said that the United States would continue its “maximum pressure campaign,” and noted that the military was “ready if necessary”. He further stated that a meeting could still go forward if Kim Jong Un is willing to engage constructively.

We will report on this situation as it develops. For now, it seems that there is unlikely to be significant change in the U.S. sanctions regime against the DPRK.

]]>https://www.shiplawlog.com/2018/05/25/sanctions-north-korea/feed/0crogers@reedsmith.comSanctions on Iran – The EU Responsehttps://www.shiplawlog.com/2018/05/21/sanctions-on-iran-the-eu-response/
https://www.shiplawlog.com/2018/05/21/sanctions-on-iran-the-eu-response/#respondMon, 21 May 2018 17:05:46 +0000https://www.shiplawlog.com/?p=1510Continue Reading]]>Following President Trump’s announcement that the United States will withdraw from the Joint Comprehensive Plan of Action (“JCPOA”) and re-impose US sanctions (including secondary sanctions) against Iran, the European Union has chosen to signal its commitment to the continuation of the JCPOA. Readers will be aware that the US has indicated it will be re-imposing secondary sanctions on Iran over the course of the coming months, following two winding-down periods, the first of which ends in August this year, and the second of which ends in November.

The European Commission has now begun the process of mobilising the EU blocking statute (EU Council Regulation No 2271/96), which was previously in play following US sanctions against Cuba. This statute is designed to limit the impact of the extra-territorial US sanctions in a number of ways. Central among these are provisions requiring EU persons not to comply with any restrictions provided under US secondary sanctions, and preventing the enforcement of judgments relating to alleged breaches of the US secondary sanctions. Note that the blocking legislation relating to the US secondary sanctions on Iran is not, yet, in effect.

It remains to be seen how EU companies will navigate the potentially mutually-exclusive requirements of the US secondary sanctions and EU blocking legislation. We shall report further on these developments as additional information becomes available.

]]>https://www.shiplawlog.com/2018/05/21/sanctions-on-iran-the-eu-response/feed/0crogers@reedsmith.comSanctions and Iran: President Trump’s 8 May 2018 announcement and what this means for non-US shippinghttps://www.shiplawlog.com/2018/05/15/sanctions-and-iran-president-trumps-8-may-2018-announcement-and-what-this-means-for-non-us-shipping/
https://www.shiplawlog.com/2018/05/15/sanctions-and-iran-president-trumps-8-may-2018-announcement-and-what-this-means-for-non-us-shipping/#respondTue, 15 May 2018 13:45:22 +0000https://www.shiplawlog.com/?p=1505Continue Reading]]>On 8 May 2018, President Trump announced his decision to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA) and to reimpose on Iran a multitude of sanctions that were lifted in January 2016 under the JCPOA.

This means a significant change to non-U.S. companies’ ability to trade Iran, and has particular relevance to the shipping industry. We summarise below the potential implications of President Trump’s announcement on chartering business, but readers should be aware that the impact on individual spot fixtures and longer-term charterparties, as well as other forms of shipping-related contracts, including ship sale and purchase, contracts of affreightment and brokerage agreements, should be considered on a case-by-case basis.

Ultimately, when looking at your Iran-related trading it will be important to consider your business’ exposure to potential enforcement by the Office of Foreign Assets Control (OFAC) as well as your contractual position vis-à-vis any counterparties.

]]>https://www.shiplawlog.com/2018/05/15/sanctions-and-iran-president-trumps-8-may-2018-announcement-and-what-this-means-for-non-us-shipping/feed/0lhansson@reedsmith.com, crogers@reedsmith.com, erymland-kelly@reedsmith.comU.S. to terminate vast majority of economic sanctions on Sudanhttps://www.shiplawlog.com/2017/10/09/u-s-to-terminate-vast-majority-of-economic-sanctions-on-sudan/
https://www.shiplawlog.com/2017/10/09/u-s-to-terminate-vast-majority-of-economic-sanctions-on-sudan/#respondMon, 09 Oct 2017 14:51:19 +0000https://www.shiplawlog.com/?p=1406Continue Reading]]>Following a 16-month diplomatic effort, on October 6, 2017, the U.S. government announced that it will terminate the vast majority of economic sanctions against Sudan. The revocation will be effective on October 12, 2017. Sanctions against South Sudan will remain in place as will sanctions in response to the situation in Darfur.

The EU position regarding Sudan and South Sudan remains the same as it has been since 2014 and 2015 respectively.

As a result, it remains necessary to keep in mind the differences between the U.S. and EU regimes when assessing the propriety of transactions involving both Sudan and South Sudan.